Exploring and keeping readers up to date with the growing economic and political ties between China and South America. Including all the good stuff: Commodities, Energy, International Finance, South-South Cooperation, Microfinance and more

Below I have copy and pasted the opening of the document. Click the link above to download the PDF to your desktop. It's only 6 pages and not a bad read. Enjoy.South-South cooperation has gained prominence in global development policies as a result of its inclusion in the Accra Agenda for Action, the September 2008 agreement which reinforces the aid effectiveness principles of the Paris Declaration. This opens up an important forum for encouraging South-South cooperation as a mechanism for horizontal learning and for promoting the development of national capacities. However, strengthening South-South cooperation at the conceptual and operational levels still poses major challenges, as does improving the measurement of its scale and impact.

Looking to the new task team on South-South Cooperation within the Working Group on Aid Effectiveness (WP-EFF), the following pages aim to analyze the opportunities and challenges of South-South cooperation in Latin America and the Caribbean. As a region containing countries with numerous similarities in their political and institutional history and patterns of social and economic development, Latin America and the Caribbean constitutes a privileged environment where a number of shared agendas are already evolving. However, the operationalisation of South-South cooperation within the framework of the Accra Agenda for Action and the Paris Declaration also faces a series of specific circumstances1 that future political decisions and analytical work need to address in concrete ways.

The ideas expressed in this document stem from the joint reflections of two researchers from the Colombian organization Enlaza and the European think tank FRIDE, respectively. The analysis has benefit ted particularly from bilateral talks with Latin American and European experts over the past three months, on the one hand, and a workshop held on 6 March 2009 in Bogota, on the other. Both authors wish to express their deep gratitude to all interviewees for sharing their vision on South-South cooperation, which is increasingly important to Latin America and the Caribbean.

About FRIDEFRIDE is a think tank based in Madrid that aims to provide the best and most innovative thinking on Europe’s role in the international arena. It strives to break new ground in its core research interests of peace and security, human rights, democracy promotion, and development and humanitarian aid, and mould debate in governmental and non-governmental bodies through rigorous analysis, rooted in the values of justice, equality and democracy.

FRIDE seeks to provide fresh and innovative thinking on Europe’s role on the international stage. As a prominent European think tank, FRIDE benefits from political independence, diversity of views and the intellectual background of its international staff.

Zhukov made the remarks at the annual China-Russia Investment Forum and stressed the two nations should work together in many areas, but that energy cooperation was especially important and should be expanded.

The financial crisis has definitely affected the two nations. Russia being especially hard hit because of declining oil revenues and China because of plummeting demand for exports.

Nevertheless, the two BRIC countries have managed to a strengthen their level of economic and trade cooperation. Last month, China agreed to loan Russia $25 billion in exchange for 300 million tonnes of oil through pipelines to China from 2011 to 2030.

A new pipeline is already well into the planning stages from Russia's Skovorodino in its far-eastern Amur region to China's northeastern city of Daqing.

In 2008, China ranked as Russia's second largest trading partner behind the European Union. On the flip side, Russia came in as China's 9th largest trading partner, down 2 spots from 7th in 2007.

Volatile markets, record high commodity prices followed by record drops in prices mixed with separate agendas in both countries may have hindered the growth of bilateral cooperation in the past.

With two very different economies and complementary attributes, Sino-Russian Cooperation will continue to grow. Russia has the fuel and resources which China need to develop. China has the cheap manufactured goods Russian's are learning to love. More importantly, China also has the cash Russia needs to finance it's growth.

Friday, March 27, 2009

Look out old giants. Petrobras may end up competing with one U.S and two European companies looking to secure the rights to develop Iraq's Nahr Bin Umar oil field, reported a senior Iraqi official involved in the talks.

"Petrobras had carried out studies on Nahr Bin Umar during the 1970s and the Oil Ministry may invite it for negotiations," the official said.Earlier this week, an Iraqi oil official said Baghdad had invited a consortium of Total SA and Chevron Corp. to compete against StatoilHydro ASA and a fourth company which he didn't name.

Click here to read more about this development from the Dow Jones Newswires, courtesy of Rigzone

If you missed this article about Yahoo's new widget engine you should definitely take a moment to read a bit about.

The idea... Take all those people around the world who are sitting on their couch watching TV with their laptop on. Surfing the net, youtubing, twittering, facebooking, etc. Or those kids who are on their I-Phones text messaging the world and checking out some pics someone uploaded to their Picasa while their family is eating dinner with the TV on in the background. Note... you might not be able to relate too much to this if you're not from the US, where we love to watch TV during dinner.

Basically Yahoo is capitalizing off that basic idea of combining the most common things people do on the Internet in multi-tasking mode. People will be able to social network, wikipedia things, google, youtube and more. Yahoo has designed some great widgets to facilitate the process and also help it generate some add revenue. So it might not be the worst idea in the world to pick up some shares of yahoo either.

Although as you can see the stock doesn't have the most stellar appeal because of its still relatively high trading price considering the state of this current market. Nevertheless, the fact Yahoo has held up considerably well in this downturn while fighting off take-over bids from MSN and Google, is something worthy of mention and thinking about.

In other words, Yahoo is not going anywhere. If it does get bought out by some bully, it won't be on the cheap. This offers shareholders some security in knowing their investment will not suddenly evaporate--which is a legitimate concern these days.

Your television set may be the most expensive, eye-catching piece of electronic equipment in your home, but compared to a computer with Internet access, it's just a dumb box. With their low-tech IQs, TVs encourage a lot of family-room multitasking: While watching the big screen TV, lots of people are looking away to surf the Web with the computer on their lap or the mobile device in their hand.

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If you're reading this and thinking that Internet on the TV has been tried before with limited success, you're right. For years, companies have designed external boxes that bring some form of the Web to your TV. These include Microsoft Corp.'s Xbox, Apple Inc.'s Apple TV and some features of TiVo. But the Yahoo Widget Engine differs from these boxes in two ways. First, Yahoo's widget system works simultaneously with your TV programming, so you don't have to turn off the college basketball game to pull up a news story about a star player. Second, it will include widgets with video content that directly compete with live programming.

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With a few steps, snippets of information, or shortcuts, can be created for certain widgets, like Yahoo Weather and Finance, to save you from opening the widget to see more details in a left-side panel. I created a Yahoo Finance snippet for McDonald's stock so I could see this stock's status at the bottom of my screen without opening the Finance widget. People who have Yahoo accounts can synchronize their account settings with the TV, such as stocks saved in Yahoo Finance.

As the global economic crisis worsens and Chinese exports shrivel, thousands of factories are closing and already 20 million Chinese workers have lost their jobs. Is the global financial downturn creating potential political and social unrest in China?

Emmy award winning journalist Charlie Rose has been praised as "one of America's premier interviewers." He is the host of Charlie Rose, the nightly PBS program that engages America's best thinkers, writers, politicians, athletes, entertainers, business leaders, scientists and other newsmakers. USA Today calls Charlie Rose, "TV's most addictive talk show." New York Newsday says, "Charlie's show is the place to get engaging, literate conversation... Bluntly, he is the best interviewer around today."

Thursday, March 26, 2009

Peru's plan to raise money in the wake of the recent stock market rally has worked. International investors bought $1 billion worth of the new bonds yesterday (Wednesday, March 26), registering five times higher demand than than supply according to Peru's Minister of Economy and Finance, Luis Carranza.

Although I feel this sense of international confidence in unjustified, considering the true state of Peru's economy. It was still a very wise idea for Peru to raise money when it did.

As I expressed in this previous post, Peru will eventually have to face facts now that commodity revenues have declined thanks to falling prices.

Raising money when it did (before their debt rating is cut) was therefore a great idea. Whether international demand for the bonds was justified or not is not really important, surviving and raising money during these tumultuous times are what matters and it seems Peru is doing well at just that.

Lydia Polgreen of the New York Times wrote a very informative piece yesterday about how the global economic crisis is affecting China's appetite for risk taking in Africa.

One year ago commodities where at record setting prices and China was growing in the double digits. It was desperate to secure resource wealth to fuel its growing economy and Africa seemed like a logical place to venture.

Unlike their western counterparts, Chinese companies did not think twice about entering some deals that would otherwise make their American, Canadian or European competitors cringe.

Lydia Polgreen writes that once upon a time, “French colonists once called Guinea a geological scandal, so rich are its deposits of valuable minerals. Despite years of mining and billions in profits, Guinea remains one of the poorest and least developed countries in Africa.”

This is of course, the exact reason China looked to places like Africa and South America to feed their commodity demand.

Guinean and Chinese workers at the construction site, working onbuilding a $50 million, 50,000-seat stadium in Conakry, Guinea

Despite the global slowdown, China still continues to explore potential investments but this time around China is being a bit more cautious. Philippe de Pontet, an analysis from Eurasia Group explains “We have seen in the recent past Chinese companies wade into countries nobody else would, that may be changing.”

For instance, in Guinea Chinese ambassador Huo Zhengde said in an interview that the “political situation is not very stable and the international markets are not favorable.” Referring to the fact a junta had recently seized power after the death of the country's longtime president in December.

In response, China backed away from a promised investment of $1 billion for the construction of a hydroelectric dam in Guinea.

Instead of investing in projects that will empower African countries with the infrastructure to put in place a more solid foundation for long-term growth, China is backing away and looking for bargains in the commodity sector in more stable places such as Zambia and Liberia.

Polgreen reports “trade between Africa and China grew to more than $100 billion by 2008, from less than $10 million in the 1980s. African leaders spoke openly about China’s offer of an alternative to the edicts of Western-dominated institutions like the International Monetary Fund and the World Bank.”

In the wake of the current global economic crisis change will come in many different shapes and sizes, I just wonder if the hope that China would emerge as a new epicenter of economic power and foreign direct investment for emerging markets is legitimate considering the current situation.Click here to read the NYT piece

The Obama administration has finally come up with a plan to deal with the real cause of the credit crunch: the infamous "toxic assets" on bank balance sheets that have scared off investors and borrowers, clogging credit markets around the world. But if Treasury Secretary Timothy Geithner hopes to prevent a repeat of this global economic crisis, his rescue plan must recognize that the real problem is not the bad loans, but the debasement of the paper they are printed on.

Today's global crisis -- a loss on paper of more than $50 trillion in stocks, real estate, commodities and operational earnings within 15 months -- cannot be explained only by the default on a meager 7% of subprime mortgages (worth probably no more than $1 trillion) that triggered it. The real villain is the lack of trust in the paper on which they -- and all other assets -- are printed. If we don't restore trust in paper, the next default -- on credit cards or student loans -- will trigger another collapse in paper and bring the world economy to its knees.

If you think about it, everything of value we own travels on property paper. At the beginning of the decade there was about $100 trillion worth of property paper representing tangible goods such as land, buildings, and patents world-wide, and some $170 trillion representing ownership over such semiliquid assets as mortgages, stocks and bonds. Since then, however, aggressive financiers have manufactured what the Bank for International Settlements estimates to be $1 quadrillion worth of new derivatives (mortgage-backed securities, collateralized debt obligations, and credit default swaps) that have flooded the market.

Wednesday, March 25, 2009

Great article from Danwei, about how Korean nationals are leaving China because of the worsening global economy. Danwei is a website about media, advertising and urban life in China which does a great job of combing their own knowledge and observations of China with great skill at reading in between the lines of what Chinese state media reports.

Here's an excerpt of the article:

Beijing and Shanghai are home to tens of thousands of Korean nationals whose lives and businesses have been hit hard by the snowball effect of the downturn. The Korean won's decline against the RMB forced many Korean businesses to scale back or close down, and drove up the relative price of education in China. An exodus of failed business owners, out-of-work foreign employees, and foreign students left shops and services competing for a substantially smaller Korean population, and has driven many of them out of business, too.

The cover feature of the March 16 issue of CBNweekly profiles a few Koreans living in the communities of Wangjing (望京) in Beijing and Gubei (古北) in Shanghai who have decided to remain in China despite economic uncertainties.

Peru is planning on raising some money through the sale of 10-year US Dollar denominated bonds—the first offering of new dollar-denominated bonds for Peru in over two years.

Record setting commodity revenues from the past couple years helped Peru avoid having to raise money in the past, but as the global economy takes a turn for the worse and as commodity prices remain low Peru is now looking to take advantage of the recent market rally.

Furthermore, back in July of 2008 Peru’s foreign currency debt rating was raised to investment grade by Standard and Poor’s. Considering economists probably decided the upgrade up in North America where they have little concept of the true situation on the ground in Peru, it is smart for Peru to try and raise more money while they can hold onto the good investment grade. Bloomberg reported in this article, Peru may sell the bonds to yield 4.50 percentage points above U.S. Treasuries. This information comes from a person familiar with the offering who declined to be identified because terms aren’t set. Peru hired Goldman Sachs Group Inc. and JPMorgan Chase & Co. to manage the sale, according to a filing today with the U.S. Securities and Exchange Commission, which didn’t specify the timing of the transaction.

“The rally in risky assets in the past couple of weeks opens a window of opportunity for countries with strong fundamentals such as Peru,” Boris Segura, an economist at Morgan Stanley in New York, said in a telephone interview.

Mercosur and the European Union reaffirmed their commitment to reach a wide ranging agreement,—in spite of stalled negotiations— and to push for the conclusion of the World Trade Organization Doha Round talks.

Brazilian Foreign Affairs minister Celso Amorim who visited Brussels for political and trade talks said that Mercosur and EU “have similar views in many international issues” and mentioned as examples the G-20 group and the EU-Brazil strategic association.

Don't be ashamed if you're asking yourself, "what the heck is the War of the Pacific?" Well don't feel too bad, the majority of people who even claim to be history war buffs are largely ignorant to the fact that there have even been regional wars in South America.

The War of the Pacific (1879-1883) is one of the major wars waged between South American nations. The war escalated over territory disputes along the old boarder region of Peru, Bolivia and Chile.

Naval Battle of Iquique: the Esmeralda versus the Huáscar

If you are interested, check out the surprisingly comprehensive Wikipedia page on the war.

Basically I'll break down the history of the war as follows. Just keep in mind I am a Peruvian-American, so I may be a little bias and my quick synopsis may be full of typical South American cliche's...

Once upon a time, in a land to the South, there was this barren and skinny country known as Chile. Despite having virtually no natural resources, Chile was working its heart out to make something of itself in the tumultuous reality of the late 19th century.

Bolivia on the other hand, was and still is, a country with a abundant supply of natural resources. Sadly, much like how the Spanish squandered all the wealth they stole from Peru and Bolivia, the left over remnants of the conquistadors were running the country as if they were still living the life of a aristocrat in Spain back in the 17th century.

When it came time to work out a plan for doing business with Chilean ventures edging up Bolivia's old coastal province of Antofagasta, Bolivia decided to create a very unfair business environment which essentially leached from the profits of Chile's new enterprises.

Economically speaking, Peru at the time was stuck somewhere in between Chile and Bolivia . Like Bolivia, Peru has a great deal of natural resource wealth. The difference between the two was that thanks to commerce and a friendlier terrain, Peru had a bit more than Bolivia going on in terms of entrepreneurial spirit.

However, at the time Peruvians thought their shit smelled better than the rest of Latin America because the country had been Spain's hub when it owned much of South America.Peru being a pompous country (with nothing to back it up), decided to support Bolivia when the arguing with Chile turned violent.

Chile was the best prepared for war of the three. Chile's military had recently inherited some nice Prussian (German) soldiers from Europe who knew what they where doing, compared with the now out dated left-overs of Peru and Bolivia's Army and Navy from colonial times. Furthermore, when considering the way things escalated, Chile had the most incentive to expand its boarders.

When war broke out, Chile spanked Peru and Bolivia, over-powering their armies with ease.

Chile even had the guts to March its army through Peru's capital, Lima. This event is remembered much like Hitler's escapade in Paris with the Nazi Army. EMBARRASSING to think about as a Peruvian to this day, but no less well deserved historically speaking.

Chilean Army marching on Lima in January, 1881

Once the war was over, Chile had claimed two provinces of Peru and one of Bolivia's. Flash forward a few years and these regions are now Chile's prize possessions. Lucky for the Chileans, the provinces they won (or took away depending on your perspective) are loaded with valuable base metals like copper, zinc and gold.

Here's a map that shows the territories Chile claimed from Peru and Bolivia. Yes Peruvians remain bitter about this mis-hap in their history against their southern rival Chile. Bolivia as you can see lost it's one exit to the Pacific, creating a land-locked country.

A little unfair yes... Especially for a country with some of the most treacherous terrain in South America and one which remains one of the poorest in the region to this day. As history shows, this is sadly how the cookie crumbles and I seriously think the US will hand Texas back to the Mexican's before Chile cedes any land it won from Bolivia over 100 years ago back.

The new map after the war

Now that you have some context, check out this article which describes how President Evo Morales of Bolivia is once again trying to get the land it lost to Chile back.

In 2007 the countries of Venezuela, Argentina, Brazil, Bolivia, Ecuador, Uruguay and Paraguay formed Banco del Sur (Bank of the South). The bank if finally opening its doors, and, not surprisingly has made few headlines up in North America.

Banco del Sur will launch operations with a initial $10 billion in capital for loans and other programs, reported Venezuela's state news agency ABN.

Contributions break down as follows. Venezuela, Argentina, Brazil will each contribute $2 billion. Bolivia, Ecuador, Uruguay and Paraguay will pool together the other $4 billion.

Sounds all fine and dandy, but easier said than done. It would be some great ideal if Latin America's commodity producers could come together and form some kind of financial system to trade their goods (one random thought).

It would also be nice if inter-regional trade could be made easier.

Yes... you can drive from Asuncion, Paraguay to La Paz, Bolivia but it will be ONE HECK OF A JOURNEY. Remember to pack extra shocks for your car too.

Good idea to keep watch on this bank and see how things progress in the coming months.

Tuesday, March 24, 2009

Japan's exports plunged by a whoppin' 49% in February, the sharpest decline since at least 1980 reported Bloomberg.

In response this depressing data, Japan seems to be preparing yet a new stimulus package. Finance Minister Kaoru Yosano said that a new package of as much as 20 trillion yen ($203 billion) is “not out of line.”

Now let me ask you... What would you do if you where a fictional Anime character who's name is Naruto. You come equipped with cool ninja moves just to let you know...

Hopefully you would be able to earn some money showing off those secret skills on the streets because its obvious no one one in the world economy really wants to buy your exports. Good luck and may the force be with you all: Honda, Toyota, Panasonic, Sony, Fuji, etc.

In another instance of South-South Cooperation, Brazil and Ecuador have just concluded a deal which makes Ecuador the proud owner of 24 Super Tucano combat planes.

The total cost of these 24 planes is unknown (Embaer did not comment), but we do know that Colombia paid $234.5 million usd for 25. The price is probably somewhere in that range, give or take a few million $'s thanks to fluctuating input costs and the typical Latin American favoritism.

Super Tucano combat planes fying in formation

The Super Tucano according to this article from the Latin American Herald is a turbo-prop, multi-purpose aircraft which is capable of carrying variety of conventional and smart weapons.

Ecuador has ordered the two-seat version of the plane in order to be able to also use it as a training air craft. Officials had the following to say.

“We’re very honored to expand our relationship with the government of Ecuador, a country that operates different models of Embraer aircraft,” the firm’s executive vice president for defense products, Orlando Jose Ferreira Neto, said in a statement announcing the deal.

“The Super Tucano is the ideal aircraft to execute patrol and training missions, and we are sure that it will fully meet the needs of the Ecuadorian air force,” he added.

Financially, Embaer like much of the rest of the Airline Industry (see this article from the Straits Times) has felt the pinch of the global down turn especially hard. Everything from orders of military craft to private jets are down. Overall depressing and continued negative market sentiment doesn't exactly help too much either.

The stock is down a lot, but as one of Brazil's prize jewels of innovation, success and EMPLOYMENT... Embaer is not going anywhere. The company has $1.2 billion usd in debt, BUT thankfully it also has $1.62 billion usd in cash sitting on the side lines.

This will both allow Embraer to make good on its debt obligations, keep its working paid to prevent civil unrest at production sites in Brazil and ultimately this emerging market company will emerge a little bit higher on the food chain of the new global economy.

Monday, March 23, 2009

Chinese President Hu Jintao and his Uruguayan President Tabare Vazquez met in Beijing yesterday for another typical diplomatic cocktail party in the world of Sino-South American relations.

These meet and greets between China and South American countries are typically very similar, nevertheless, some good information can emerge from them if you pick it out and read in between in the lines.

Chinese President Hu Jintao (L) hosts a welcoming ceremony for Uruguayan President Tabare Vazquez at the Great Hall of the Peoplein Beijing, capital of China, March 23, 2009. (Xinhua/Yao Dawei)

->> China has become the third biggest trading partner of Uruguay->> The country's plan on exploring ways to cooperate in the agriculture, fishery, product quality inspection, software and engineering technology consultation fields->> China also proposed the two nations boost cultural and people-to-people exchanges by expanding cooperation in culture, education, sports, media, and tourism sectors—good news for people in the tourism industry.

The typical diplomatic kiss a$$ that goes down on a usual meeting of a top Chinese and South American official.

->> China and the given South American agree (over-and-over again) to promote bilateral relations to a higher level.->> China South American country XYZ state that important progress in cooperation in various areas has been achieved since diplomatic relations where established back in the day->> Both country's agree to support peaceful resolutions to international issues and not intervene in one anthers internal affairs... Meaning, lets do business and help each other out but don't you dare stick your nose into my house.->> China thanks South American country XYZ for supporting the one-China policy and its firm support on issues concerning Taiwan and Tibet.

Tata Motors, one of my favorite emerging market companies for a variety of reasons, released it's long awaited Tata Nano today. The car is priced at a very affordable $2000 usd or 100,000 rupees.

Already being deemed "The People's Car," Tata Motors has high hopes for it's Nano. Tata Motors recently financed the purchase of Land Rover and Jaguar with debt and has bonds coming due this summer. Tata Motors also recently lost a great deal of money after having to abandon it's original factory it built for assembling Nano's because of local protests.

These two problems highlight the Tata's dire need to generate some cash. The Nano will hopefully help. The Indian government has also recently pledged to help certain state banks in some regions by offering subsidized loans to them if they make car loans to people looking to purchase a Tata vehicle.

Despite seeing it's stock plummet in value over the past 8 months, Tata Motors still offers a very attractive dividend of 7.8%. Yes the company is straddled with debt after its recent acquisition, but it does have a solid cash flow coming into from a relatively still well preforming market... a.k.a, India (at least when compared with other areas in the global economy).

Furthermore, there is a great deal of back logged demand for transportation in India. As the central government attempts to stimulate growth by expandinginfrastructure, Tata Motors will be a clear winner.

At the moment avg travel speeds on Indian roads are horrendous. Tata Motors can also take advantage of this because even though the specs of the Nano (see this Reuters article) are a bit lacking, there is no need to travel with a V-8 engine in India when you can rarely, if ever take your car above 30 miles per hour.

Increases in infrastructure spending will spur demand for cars and thanks to such the incredible growth of India and the increasing number of vehicles hitting the market every year will make the Nano very appealing in the years to come for new drivers hoping to get their hands on their first car in India.

On a side note, Tata Motors aquisiton of Land Rover and Jaguar may have come at a very bad time in the auto industry, but they no less did adquire two luxury car brands. This will give them the ability to one day penatrate western markets with greater ease and higher quality products.

Sunday, March 22, 2009

Argentina is creating a Solidarity Fund according to the Latin American Herald, in this article.

BUENOS AIRES – The Argentine government said on Thursday that the country’s provinces and municipalities will receive 30 percent of the revenue from a controversial tax on soy exports.

President Cristina Fernandez announced the plan in a meeting with governors and mayors at her official residence on the outskirts of Buenos Aires.

She told them she signed a decree enabling their jurisdictions to “co-participate” in the proceeds of the levy on soy exports that has sparked a year-long battle between her government and Argentina’s powerful agribusiness interests.

Fernandez said provincial administrations would share 30 percent of a “solidarity fund” financed from the 35 percent tax on exports of soy.